DCIT (IT) 2(2)(2), MUMBAI vs. HOYER GLOBAL TRANSPORT B.V., MUMBAI

Per Manoj Kumar Aggarwal (Accountant Member)

Hoyer Global Transport B.V. Assessment Year 2011-12

1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in directing the AO to delete addition of Rs.1,66,45,025/-, without appreciating the facts of the case that Samsara Shipping Pvt. Ltd acts as a dependent agent and does all the works and activities on behalf of the assesse company, and therefore constituted the PE of the assesse in India.

2. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.

3. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.

The assessment for impugned AY was framed by Ld. Deputy Director of Income-Tax (International Taxation)-3(1) on 25/04/2014 u/s 144C(3) read with Section 143(3) of the Income Tax Act,1961. 2.1 Briefly stated the assessee being non-resident corporate assessee engaged in the business of transportation of containerized cargo was assessed for impugned AY on estimated basis @7.5% on total receipts which came to Rs.1,66,45,025/- as against ‘Nil’ return filed by the assessee on 27/09/2011. The assesse company was incorporated in Netherlands and earned income of Rs.22.19 crores from its business operations of transportation of containerized cargo and claimed exemption in terms of Article-5 of Double Taxation Avoidance Agreement [DTAA] with Netherlands in view of the fact that the assessee did not have any permanent establishment [PE] in India. However, Ld. AO show-caused assessee as to why not the agent of the assessee namely Samsara Shipping Private Limited [SSPL] be treated as the assessee’s agency PE in India as done in earlier assessment years. The assessee contended that the agent was not dependent agent but unrelated, independent entity who provided similar services to several principles besides the assessee and Hoyer Global Transport B.V. Assessment Year 2011-12 hence, did not constitute assessee’s agency PE in India. It was also pointed out that the assessee merely contributed only 7.87% towards income of the agent. However, not convinced, Ld. AO estimated the income @7.5% on assessee’s total receipts and completed the assessment. 2.2 Aggrieved, the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 18/12/2015 where the Ld. CIT(A), placing reliance on the stand of its predecessors in assessee’s own case for earlier years, concurred with the stand of assessee and concluded the matter in the following manner:- 4.5 Thus, the perusal of the appellant’s submission clearly establishes the agent in India i.e. Samsara Shipping Pvt.Ltd. is nowhere dependent agent of the appellant and hence does not qualify as PE as envisaged in Article 5(5) and 5(6) of the India- Netherlands DTAA. In the appellant’s case, in A.Y.2008-09 my predecessor CIT(A) vide his orders bearing No. CIT(A)-10/ADIT(IT)-3(1)/IT-437/10-11(2008-09) dated 13.07.2011 has held that the appellant’s agent ie., Samsara Shipping Pvt. Ltd. was an agent of independent status thereby itself disqualifying it from treatment as a PE of the appellant in India. In the said order, the CIT(A) while ruling that SSPL does not constitute an Agency PE of the appellant in India held as follow: “In the case of the appellant, it has been demonstrated by the AR that only 3.11% of the receipts of the agent are derived from the appellant. As was pointed out by the AR repeatedly, a 3% share in gross revenues does not at all indicate that the agent was wholly or almost wholly devoted with regard to the appellant’s business. Lastly, as pointed out by the AR, the transactions between the agent and the principal were at arm’s length. I find nothing in the facts presented before me as also the assessment order, which would indicate that the dealings between these two parties were not at arm’s length. I also find that this ground has been similarly held in favor of the applicant by one of my Ld. Predecessors while dealing with the appeal for AY 2004-05 in his order no. CIT(A)-33/Intl. Tax/IT/106-H/06-07, in the case of this very same appellant. Hence, I hold that M/s Samsara Shipping Pvt. Ltd was an agent of independent status, thereby disqualifying it from treatment as PE of the appellant in India In so far as the provisions of article 5(5) of the DTAA are concerned, the same are seen to be applicable in the case of a dependent agent. As has already been held that this is a case of an independent agent, the provisions of article 5(5) are hence seen not to come into play.” 4.6 Similarly, in the appeals for AY 2009-10 and AY 2010-11 in the appellant’s own case, vid orders dated 27.08.2013, my predecessor CIT(A) has held that the appellant’s agent in India was an agent of independent status thereby itself disqualifying it from treatment as a PE of the appellant in India.

Hoyer Global Transport B.V. Assessment Year 2011-12 4.7 The similar set of facts even prevail in the present A.Y. Therefore, I am of the considered view that Samsara Shipping Pvt.Ltd. was an agent of independent status and is disqualified from treatment as PE of the appellant in India. The appellant does not have PE in India, therefore, the income arising to the appellant being non-resident will not be taxable in terms of Article 7 of India-Netherlands Tax treaty r.w. Article 5(5) and Article 5(6) of the said DTAA in view Section 90(2) of the Income Tax Act,1961. Further, as per Article 5(6) of the DTAA, independent status of the agent is to be ignored if the transaction between the agent and the principle is not at arm’s length, which is not the case in the present AY. Thus, the main criteria for invoking article 5(6) of the DTAA is not satisfied. Hence, the provisions of Article 5(6) of the DTAA shall not apply in the present case of the appellant. In view of the aforestated facts of the appellant’s case and taking note of the decisions as enumerated in the appellant’s submission and taking note of the facts available on record, I consider it proper and appropriate to hold that the appellant was not having any PE including agency PE in India. Accordingly, no part of the appellant’s income is taxable in India. Hence, the action of the A.O of taxing the receipts per order dated 25.04.2014 was not justified and correct. Accordingly, the addition so made by the A.O is deleted and these grounds of appeal are allowed.

Aggrieved, the revenue is in further appeal before us.

Hoyer Global Transport B.V. Assessment Year 2011-12 The revenue could not controvert the factual matrix in any manner and could not bring on record any contrary judgment. In view of the same, respectfully following the earlier order, we dismiss revenue’s appeal and confirm the stand of Ld. CIT(A). 5. Resultantly, the revenue’s appeal stands dismissed. Order pronounced in the open court on 24th January, 2018.